This occurred despite no significant change in rates, according to the trade group. It calculated that the average rate was 5.02% for a 30-year fixed loan compared to 5.00% a week earlier, with points decreasing to 1 from 1.05 (including the origination fee). The study assumed that borrowers have good credit, a 20% down payment or at least 20% equity in their homes.

"Although rates remain low, there appears to be a smaller pool of borrowers who are willing and able to refinance," said Michael Fratantoni, the association's vice president of research.

Together with a U.S. Commerce Department report showing new-home sales fell unexpectedly in December for the second month in a row, the slowing mortgage applications were fodder for those who believe housing, despite massive government support programs, will recover only slowly.